Most Asian currencies fell on Wednesday after unexpectedly weak service sector data from the United States and Europe spurred a flight to less risky assets. The Indonesian rupiah initially shed half a percent to 9,250 per dollar as investors sold the high-yielding currency.
But it later recovered slightly after the central bank left its key interest rate unchanged at 8 percent, as expected. "The market had already priced in the decision, and for February at least there is consensus on the interest rate," said Han Sia Yeo, a strategist at Bank of America.
"US outlook continues to be the dominant theme now, and of course interplay of commodity prices and imported inflation could potentially influence rate decisions in Asia," he said. The Philippine peso briefly fell 0.7 percent to 40.81 per dollar after it was pressured down by stocks, but rebounded to 40.58 later in the day, a 0.1 percent drop from its previous close.
On Tuesday, the peso got a boost after data showed January inflation rose to 4.9 percent, its highest annual rate in more than a year, which sparked speculation the central bank would hold off on easing interest rates after its rate cut last week.
The Institute for Supply Management's non-manufacturing index plunged in January to levels not seen since the 2001 recession, reinforcing fears the US economy was slowing even as the Federal Reserve had cut interest rates by a total of 225 basis points since September in a bid to revive growth.
Meanwhile, euro zone services growth slowed to a near halt, casting doubts about the outlook for Asian exports. "The main reason for the fall in currencies was the US stock market, so investors pared some short dollar positions as a result," Yeo said.
The Singapore dollar briefly fell about 0.6 percent to 1.4220 per US dollar before it lifted slightly to 1.4175. Trading volumes were thinned with markets in South Korea, China and Taiwan closed for Lunar New Year. Asian stocks fell on Wednesday, with MSCI's measure for Asia Pacific stocks excluding Japan falling 3 percent.